Centre to enact power distribution law in states

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Last Updated: Thu, Dec 06, 2012 12:15 hrs

New Delhi, Dec 6 (IBNS) The Centre plans to enact a law to fix states responsibilities in power distribution that would put the onus on states to make the power sector viable, said Union Power Secretary P. Uma Shankar.

He was speaking at an ASSOCHAM event in New Delhi.

Regular revision of tariff would be part of the responsibility, said Uma Shankar.

The proposed States Responsibilities in Electricity Distribution Bill is in the process of drafting the Power Secretary told the National Conference on Power organized by The Associated Chambers of Commerce and Industry of India.

The Power Ministry was persuading the regulator to rationalize the tariffs. Ruling out subsidizing the price of coal forever, Uma Shankar said the government wanted the regulator to come up with annual revision of power tariffs.

"The revenue gap between the cost of power and revenue generated by distribution cannot be left untreated," he said.

The practice of tariff revision would no longer be a onetime affair; there has to be regular revision of tariff, he asserted. "Distribution companies would have to file annual tariff plans."

He revealed that "in all states tariffs have been raised due to the Center's effort".

Referring to the economic health of discoms, Uma Shankar said that their health would improve with the restructuring plan of their finances approved by the Centre.

The restructuring included the past losses to be turned into equities by the states, reduction of T&D losses and regular tariff revision, he said.

A methodology was being introduced that would accurately know what the power consumption for agriculture was so that the inefficiencies of distribution were not hidden under the claim that power was being used for agriculture, said Uma Shankar.

The Centre will also ask the State Governments to give a roadmap of the areas where the losses in distribution were endemic.

Endorsing the benefits of the electricity distribution franchisee system, Uma Shankar said that Maharashtra and Bihar were among the states that have improved distribution efficiency through the system.

The Power Secretary regretted that most states were content to merely connect generation to transmission but hesitant to pay for transmission costs. "This was one of the factors that affected the economics of power distribution."

Dealing with the problem of coal supply, Uma Shankar said there was no escape from increasing coal production. "The Government would now undertake a three monthly review of coal production by those who had been allocated coal blocks."

He said that one of the reasons for the "yawning gap" between coal demand and supply was the fact that generation capacity had risen by 52 per cent in the last three years while coal output was lagging behind this growth.

In an effort to moderate the effect of high costs of imported coal on power generation costs, the formula has been evolved by which the cost of 70 million tonnes of imported coal would be spread over the domestic production of 370 million tonnes used in power sector, said Uma Shankar.

As the domestic coal production increased further such spread of costs of imported coal would dilute the impact of the higher costs of imported coal on costs of fuel for power generation, he said.

The Power Secretary also revealed plans to optimize the transportation and supply of coal so that inland generating plants were largely served by coal mines nearby and haulage was minimized.

"There is no escape from increasing coal production in view of the huge increase in coal based generating capacity planned for the 12th Plan period and in the subsequent plans. Imports of coal should be minimized," he said.

The Power Secretary assured that coal supply issues for power sector were getting priority attention from the Government.

In his address to the conference, Sushil Maroo, co-chairman of ASSOCHAM national council on power and Deputy MD of Jindal Power Ltd, expressed concern at the widening deficit between the demand and supply of coal for power generation.

He said power sector would need coal supply upto 682 million tonnes by 2017.

"The demand-supply gap had already widened from 59.98 million tonnes in Fy 2009 to 83.33 million tonnes in FY 2012. This could further rise to 185.5 million tonnes by FY 2017. At the same time imports of coal had become increasingly difficult and costly due to developments in coal exporting countries," he said.

Emphasizing the "criticality" of distribution sector reforms CEO and Executive Director of NDPL Praveer Sinha drew attention to the "vicious cycle of unsustainability of the sector due to poor network, low consumer satisfaction, unwillingness to pay, lack of paying capacity and generation becoming unviable all of them feeding into one another.